The UK tax gap – the difference between the amount of tax expected to be due and what was actually paid – was estimated at £35.8 billion in 2021/22.
This means that HM Revenue & Customs collected 95.2% of all tax due.
In 2020/21, the tax gap was around £30.8 billion.
In percentage terms, the tax gap remained unchanged, at 4.8%. This is because estimated tax liabilities rose from £643 billion in 2020/21 to £739 billion in 2021/22.
The tax gap has reduced from 7.5% in the tax year 2005/06 and has remained low and stable between the years 2017/18 and 2021/22, HMRC said.
Errors, a lack of sufficient care, evasion and criminal attacks all contribute to the tax gap.
Small businesses made up the biggest proportion of the tax gap by customer group, at 56%, in 2021/22, followed by criminals, large businesses and mid-sized businesses, at 11% each.
Wealthy individuals accounted for 5%, while other individuals account for the remaining 6%.
Jonathan Athow, HMRC’s director general for customer strategy and tax design, said: “This important research enables us to better help those making common mistakes or failing to take sufficient care, as well as tackling the minority deliberately hiding their income.”
Plugging the holes in our tax system could help refill public coffers rather than trying to raise revenue by freezing tax thresholds like income tax— Rachael Griffin, Quilter
Rachael Griffin, tax and financial planning expert at wealth manager Quilter said: “During this time of high inflation and low economic growth, the tax gap deserves the Government’s full attention.
“Plugging the holes in our tax system could help refill public coffers rather than trying to raise revenue by freezing tax thresholds like income tax and inheritance tax and increasing taxes by stealth.
“If we managed to reduce the current 4.8% tax gap by around two percentage points, the Government could generate an additional revenue of nearly £15 billion per year.
“This could help alleviate the effects of frozen thresholds, easing the financial strain on many and helping more money flow through to younger generations.”
